America is the land of opportunity and regardless of politics; it is still a great place to start a small business.

Enter my friend Michelle...

Michelle currently works as a customer service representative for a large electronics company. She really likes what she is doing but after 19 years she is yearning for a new challenge in her life.

Michelle and I have been friends for many years so she contacted me with a new idea for a business to see if I might be able to give her a few pointers on how to get started. We agreed to meet at a local coffee shop where we could sit down and discuss some of her business ideas.

After a few minutes of small talk, I asked her to describe her new business idea.

I sat and listened to her describe a very unique product idea having to do with a portable baby stroller (I’m not going to share her exact idea as I’ve been sworn to secrecy).

After listening for about 15 minutes, I told her that I think her idea was really good and that she should take the next step forward in bringing her new product to market.

With this she stared back at me with a bewildered "deer-in-the-headlights" type of look.

"So what should I do next?" she inquired.

"Well... " I answered, "You should probably think about getting together with some sort of technical designer so you can put your product idea on paper."

"After you have an actual design... you might want to think about having a couple of prototypes made to see if the design has any merit."

She looked at me... still a bit confused.

"Where do I find this designer person?" she asked.

I gave her some guidance regarding as to where she might locate a CAD designer and where she might go to have a prototype built without breaking the bank.

She scribbled several notes on her yellow pad and then looked up at me and sighed, "I don’t know... all this business stuff is so intimidating... I’m not an MBA... how do I learn about all this business stuff?"

"Look Michelle... running a small business might seem complicated... however at its core, business is really quite simple."

"Several years ago I attended a conference where the key note speaker, entrepreneurial "guru" Verne Harnish, gave a talk about the structure of business. He stripped it down to just 6 core essential elements... let me share them with you today."

Business, at its core, really just consists of six things:

PEOPLE

Customers
Employees
Shareholders / Bankers

ACTIVITIES

Producing a product or service
Selling
Record keeping

PEOPLE

Customers

In order to be a business concern, you will need customers... plain and simple. The way to acquire customers is to create a message and then broadcast that message through multiple channels to a target audience.

Unless you are a sole practitioner (which really isn’t a business... it’s a job), you will want to hire employees to do some work. The idea behind having employees is that they can produce more revenues than they cost creating a profit for the company.

In order for this to happen, the right employees need to be hired. They need to be trained and be put in a position to succeed. Once they are creating profits for the company they have become very valuable so care needs to be taken to ensure that they stay with the company.

Typically this function of a business is called Human Resources (HR).

Shareholders / Bankers

Starting and operating a business takes capital (money).

The money to operate a business can only come from three sources: selling shares of the business to investors (shareholders), borrowing the money from a lender (bankers), or from profits of continuing operations.

A start-up business has no profits from continuing operations so it needs to rely on investment capital and borrowing. This investment can come from the company’s founders (you), friends and family members, or on occasion, venture or "angel" funding. This seed money will help to pay the expenses of the company until which time the company can earn a profit.

The function of the business is typically handled by the company Chief Financial Officer.

ACTIVITIES

Producing a product or providing a service

This is the area that most people think of when they think about business.

If the company is product oriented, then the product must first be created and then manufactured. Many would-be entrepreneurs might have a great idea for a wonderful new product, but the key is to actually make something... not just think about making something.

Some companies don’t have any products but rather provide a service to its customers.

This function of a business is called Engineering, Manufacturing and/or Operations.

Selling

If it’s the marketing department’s function to find the prospect, then it’s the sales department to make sure that prospect becomes a customer.

Marketing finds a way to bring the potential customer to the car lot... Sales makes sure the customer on the lot drives away in a new car.

Marketing is about people... sales is about activities.

Record Keeping

It is vital that all businesses keep good records. Without record keeping, it would be impossible to determine if the company is producing profits or losses.

Record keeping tracks where revenues are being produced and where expenses are being made.

Record-keeping is also about creating systems and controls to help manage, store and quickly recall the data and information.

Record keeping is typically the function of the Accounting department but also encompasses the IT department as well.

People vs. Activities

It’s important to note that the first three elements of business - Customers, Employees and Shareholders - are about people.

The second three elements of business - Products / Services, Sales, Record Keeping - are about activities.

We manage only activities... not people... instead we lead people...

With people... we look to acquire them... grow them... and keep them...

With activities... we look for faster, cheaper, and better...

This is business in a nutshell...

My time with Michelle was coming to a close.

I told her to send me an e-mail reminding me to send her a few product designer contacts.

She nodded in agreement and we left the coffee house going our own separate ways.

As I drove back to the office that afternoon, I wondered if Michelle would move forward with her ideas. It takes a special person to venture out of their comfort zone to become an entrepreneur. It’s not for everyone...

It involves a lot of hard work, dedication and persistance... but the rewards in the end can be great... both in terms of profits and the feeling of making a true difference in the world.

Thank you for your support of OptiFuse where we understand that small business is the foundation of our society and we wish well upon those who try to make it a go...